Help to Buy scheme is still needed says group
A call to extend a controversial scheme that gives a tax break to first-time buyers in the property market has been made by the Banking & Payments Federation Ireland, as Minister for Finance Paschal Donohoe puts together his Budget for 2020.
The Help to Buy scheme provides a tax incentive of up to €20,000 on the purchase of a new-build property up to the cost of €400,000, and was introduced in 2017 to bolster the housing industry.
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It is scheduled to come to a close at the end of this year. There was a surge in claims in the year to July from a year ago, as the end-2019 date approaches, as well as a slew of lobbying to retain the scheme, which has cost the taxpayer €192.6m so far.
"The scheme has had a positive effect in supporting demand for first-time buyer houses and in encouraging house-builders to build homes to meet this demand," said Brian Hayes, the federation's chief executive.
The federation said that 92pc of all first-time buyers purchasing a new property with a mortgage used the scheme in 2018 and in the first months of 2019. It said those buyers of new homes created spending across the economy, with purchases of furniture and fittings, white goods, insurance and utilities.
Critics of the scheme charge that it is an expensive way for the taxpayer to subsidise house buyers for doing what they were planning to do in the first place. They say it is effectively a scheme that helps the construction industry.
Of the cumulative 13,295 claims approved by the end of July this year, more than half were for houses that cost €300,000 or more.
To be able to afford a house of that price on the Central Bank of Ireland limits of 3.5 times income, you would have to earn more than €77,000 a year, assuming a 10pc first-time buyer deposit of €30,000.
Bodies like the Irish Congress of Trade Unions have called for an end to the scheme, saying despite good intentions, it serves as a subsidy for the building industry, and the money should be channelled to local authorities to expand social housing.